Financial emigration: What it involves

accreditation

Financial emigration is an exchange control matter that allows a South African can, with the approval of the SA Reserve Bank, to be classified as a non-resident of the country, explains Tim Powell, director of forex at Sable International.

South African residents who have been living abroad - but have not officially emigrated through the SARB - are considered SA residents for exchange control purposes.

People regarded as South African residents for exchange control purposes; who are leaving the country to take up permanent residence in any country outside South Africa, Swaziland, Lesotho and Namibia; may apply for financial emigration.

The issue of financial emigration came in the spotlight because as from March 1, 2020 South African tax residents abroad will be required to pay tax to the SA Revenue Service (SARS) of up to 45% income earned abroad if it exceeds a R1m threshold. The fringe benefits of an expat's remuneration package will also be taken into account.

"Every case requires some expert analysis of whether financial emigration is necessary or if it would put you in a more advantageous position than you currently find yourself in," comments Powell.

Fin24 reported earlier that some experts are advising expats to look at financial emigration as an option. Others caution that for some expats it might not be the best option, while yet others have mentioned the option of rather investing in a hard currencies foreign pension fund in certain circumstances.

Also, where there is a relevant tax treaty in place, an expat may be regarded as exclusively a resident in another country for tax purposes - even if he or she satisfies SA's domestic residency tests.

Powell is of the view that financial emigration does not automatically make a person non-tax resident, but it can be a contributing factor in determining the ordinary residence test.

Powell explains the process and benefits of financial emigration:

  • Complete an MP336 form;
  • Apply for an emigration tax clearance certificate through SARS;
  • Should you have no assets in SA and have been out of the country for longer than five years, you can financially emigrate with an exemption of needing to obtain a tax clearance with SARS.
  • Submit the application to SARB;
  • On approval, the proceeds of the sale of any remaining assets in SA - for instance the sale of a property or surrendering of a retirement annuity - will be deposited in an unblocked rand account from where it can be transferred overseas;
  • Financial emigration would trigger a once-off capital gains tax liability on certain assets - in SA and abroad.
  • It is possible to "backdate" the financial emigration to avoid having to pay capital gains tax on foreign assets you obtained after you left SA.
  • You can access your SA retirement annuities before the age of 55;
  • You can transfer future SA inheritance funds out of the country without being subjected to the SA resident exchange control process.
We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
14.73
-0.9%
Rand - Pound
20.26
+0.0%
Rand - Euro
17.28
+0.1%
Rand - Aus dollar
10.70
+0.1%
Rand - Yen
0.13
+0.1%
Gold
1,754.62
0.0%
Silver
22.41
0.0%
Palladium
2,019.00
0.0%
Platinum
944.00
0.0%
Brent Crude
75.34
-0.4%
Top 40
56,605
-0.9%
All Share
62,864
-0.7%
Resource 10
56,497
-3.9%
Industrial 25
81,170
+1.0%
Financial 15
14,018
+0.5%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
What potential restrictions on unvaccinated South Africans may make the biggest difference to public health, the economy?
Please select an option Oops! Something went wrong, please try again later.
Results
Limited access to restaurants and bars
9% - 44 votes
Limited access to shopping centres
17% - 85 votes
Limited access to live events, including sport matches and festivals
28% - 140 votes
Workplace vaccine mandates
46% - 229 votes
Vote